Media sentiment, institutional investors and probability of stock price crash: evidence from Chinese stock markets

Using a large sample of firm-level media reports data, we examine whether and how media reports affect the probability of stock price crash in China. We find that positive media reports reduce the probability of stock price crash, while the relationship between negative reports and the probability of price crash is U-shaped. The probability of stock price crash is more sensitive to the media reports in SOEs and large firms. Furthermore, we find evidence to support the media management behaviour of institutional investors. Such behaviour significantly changes the probability of stock price crash. However, we only observe the media management behaviour of institutional investors in firms held by non-block institutions, in support of the notion that transient investors behave opportunistically and reap short-term investment gains through media management.